I was recently asked to give an impromptu speech to share the words of wisdom I would give my 16-year old self.
My short speech was to explain the power of compounding.
It is an understanding I am trying to impart to my children of how compounding interest or returns work in your favour over time.
Of course, my children politely listen to me explain the power of compounding, roll their eyes and say, “Yes Daddy I understand.” I ask questions like, “Do you want me to buy that lego set now or a car when you turn 50?” I am not sure those questions help, turning 18 is an eternity when you are young.
Warren Buffet, the world’s third richest man, certainly understands the effect of compounding. As a child he gained an understanding of what compounding could do and it has shaped his whole life.
It is one thing to understand compound interest but applying it is where the magic happens. The sooner you start the greater the result. Continue reading